The India offices of Chinese telecom giant Huawei have been searched by the government’s Income Tax Department on suspicion of tax evasion and accounting discrepancies.
The authorities searched multiple premises of Huawei in Delhi, Gurgaon and Bangalore, and has reportedly seized electronic and documentary evidence. The Income Tax department will study them before preparing its report.
The Income Tax department said it is investigating Huawei’s royalty remittances to and on behalf of Huawei’s group companies overseas that went unreported. The department has brought similar cases against companies accused of evading taxes in India and transferring their profits to their parent companies.
“In almost all cases the department has found that money has been routed through layering to the parent company under the guise of bogus expenses, royalty, share purchases and other expenses. There is a huge loss to the exchequer,” a government source was quoted as saying by the Economic Times.
According to media reports, search operations by the Income Tax Department were a part of the larger action against Chinese telecoms equipment and smartphone companies who are under the scanner for allegedly transferring profits to owner groups in China while avoiding taxes in India.
A Huawei India spokesperson said in a media statement on Wednesday that it is confident that its operations in India were firmly compliant to all laws and regulations. “We will approach related government departments for more information and fully cooperate.”
The Huawei raid comes months after a similar action against ZTE, in which the Income Tax Department unearthed tax liabilities worth millions of dollars. The authorities recently searched offices of Chinese mobile handset makers Oppo, OnePlus and Xiaomi, accusing them of tax evasion as well.
The raids themselves come amidst ongoing border tensions between India and China. Earlier this week, the Indian government banned 54 more Chinese apps on grounds of them being a threat to “national security”.
In June 2021, the Indian government enacted the “National Security Directive” to secure the country’s telecom infrastructure by designating a “trusted source” for the purchase of equipment by telecom operators. The new regime makes it mandatory for Indian telecom operators to use trusted network equipment from “trusted sources”. Huawei has yet to receive trusted sources approval from the Indian authorities, although it has managed to secure a National Long Distance (NLD) network expansion contract worth over $20 million from Bharti Airtel.
Meanwhile, both Huawei and ZTE have yet to secure any contracts to supply 5G equipment to Indian operators – while they have not been officially banned from bidding for such contracts, uncertainty remains over their participation due to allegations that their equipment enabling China to spy on India – allegations both companies and the Chinese government deny.